India Approves Amazon's Proposal for Online Food Retailing

India's government has approved a proposal of Amazon.com Inc. to dive into the country's online grocery business, two officials with knowledge of the matter said on Monday.

The final approval from the Trade Ministry sets the ball rolling for the retail giant to invest about $500 million over the next five years to build a nationwide network to stock and deliver groceries, one of the officials, who didn't want to be identified, told The Wall Street Journal.

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An Amazon spokeswoman didn't immediately respond to a request for comment.

The South Asian nation typically bars foreign companies from selling products directly to consumers to protect the countless mom-and-pop shops that form the backbone of its retail industry. Amazon has so far had to act as an online marketplace providing online and logistics support for other companies rather than selling products directly to consumers.

Last year, India allowed foreign companies to sell groceries directly to consumers, provided the produce and processed foods are sourced locally. This opened the way for Amazon to use groceries as a launchpad to start selling directly to India's more than 1.2 billion consumers.

Amazon, which dominates online shopping in the U.S, but has gained little traction in developing countries, is investing $5 billion in its logistics network and on splashy advertisements in the world's second-most-populous country. It has made rapid progress in India since launching in 2013 and is challenging the country's dominant homegrown rival, Flipkart Internet Pvt. Ltd. The push to sell food directly to consumers in India could resemble the firm's AmazonFresh, a subscription service in the U.S. and the U.K. that provides quick food delivery for online orders.

The approval process for foreign investment in India has been streamlined, after Prime Minister Narendra Modi's government recently approved the dismantling of a Finance Ministry wing that used to scrutinize most of the foreign-investment proposals, often leading to delays. The country's Trade Ministry now calls the shots on foreign investment in retail.